Who rules your wallet when buying a car – your head or your heart?

December 13, 2016, 12:00 am Sponsored by Savvy Finance Yahoo7 Finance

As cars are so closely linked with our identity and “survival” as modern people – think about how you rely on a car for work or for dropping your children at school – it’s hard to separate the cold logician from our warm and fuzzy heart when picking a car is concerned.

photo supplied.

Many marketers and salespeople believe – in fact, insist – that people ultimately make decisions with their heart (or “gut” – or some other body part!), overriding whatever our reason or logic dictates. However, for most people, buying a car is one of the biggest purchases they will make in their lives. For younger people, it is most certainly the most they have spent on any one item.

Cars are a personal purchase

As cars are so closely linked with our identity and “survival” as modern people – think about how you rely on a car for work or for dropping your children at school – it’s hard to separate the cold logician from our warm and fuzzy heart when picking a car is concerned.

If we all followed our hearts, we’d likely purchase Ferraris or Maseratis only to see the car repossessed a few weeks later when we fell behind on repayments! Then we’d get a black mark on our credit history that ruins us financially, at least for the next little while.

Though we can’t dismiss our heart completely – we’re human after all – we can make the process a little more head-friendly.

Your head wants to know a car’s value

First off, you should figure out the value of a car. You can get to this sum by dividing the purchase cost by how long you have had it. If your current car is 10 years old and cost $20,000, it has cost you $166.66 per month. If you’ve driven it everywhere and it’s been reliable, the value for money is still quite high. This is compared to, say, a $50,000 car you drove for three years and on the weekend – that ends up at $1,388 per month. (In fact, if you only ever drove it on a Saturday and Sunday, each trip cost $644.44!) The longer you can keep a car in good condition and drive it, the more value you can extract out of it.

How much does a car cost to run? Crunching the numbers

Your head must also tell your heart about the actual cost of running and maintaining the car. Ask yourself, how much can you afford to spend each month on a car? This includes finance repayments, fuel, insurance, registration, and servicing. You can use a car loan calculator to figure out the repayments (minus some fees) to start. Savvy Finance CEO Bill Tsouvalas says this is the perfect starting point.

“We can’t account for everything when buying a car, but we can get a good enough estimate using a car loan calculator,” he says. “This takes a lot of guesswork out of buying a car – something your ‘head’ will thank you for later!”

You can figure out the rest by adding up the individual expenditures and dividing by 12. This will give you a monthly figure.

We can’t have everything – sacrificing something for your car

If you want to give your heart a little wiggle room, your head has to come up with a list of things you’re willing to sacrifice. If you spend the extra $10,000 on a V8 engine or sports pack, does that also mean no overseas holidays for the next five years? With higher priced cars come higher priced repairs, insurance and so on. Sometimes buying a luxury car marque “just because” is a “money pit” – sinking money into it that you will never recover due to depreciation. Of course, as we all know, a car depreciates in price by up to 20% as soon as you drive it off the lot.

Sometimes our heart wants what it wants, but our head can shine a sobering light on the car buying process. Make sure you make a smart decision when it comes to buying a car – not a rash one!

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